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Socialism is a political and economic system wherein property and resources are owned in common or by the state. The economic philosophies of socialism and capitalism are opposed.
- What Is Socialism?
- Understanding Socialism
- History of Socialism
- Socialism vs. Capitalism
- Socialism vs. Communism
- Contention Between Socialists and Capitalists
- Can A Country Be Both Socialist and Capitalist?
- How Mixed Economies Develop
- Socialist Countries
- Transitioning from Socialism
Socialism is a populist economic and political system based on collective, common, or public ownership of the means of production. Those means of production include the machinery, tools, and factories used to produce goods that aim to directly satisfy human needs. In contrast to capitalism, whereby business owners control the means of production an...
Common ownership under socialism may take shape through technocratic, oligarchic, totalitarian, democratic, or even voluntary rule. A prominent historical example of a socialist country, albeit one run by communists, is the former Union of Soviet Socialist Republics (USSR), also known as the Soviet Union. Due to its practical challenges and poor tr...
Socialism as a system of shared resources and collective production dates back to the earliest human civilizations. Tribal or clan-based societies would often work for the common good and work together to produce enough food and supplies for the entire population. Collective agriculture persisted for thousands of years. This was replaced in many pl...
Capitalist economies (which today are often synonymous with the free-market or market economies) and socialist economies differ by their logical underpinnings of the structures of ownership and production. Socialists and free-market economists tend to agree on fundamental economics—the supply and demand framework, for instance—while disagreeing abo...
Similarities
Communism and socialism are umbrella terms referring to two left-wing schools of economic thought. Both oppose capitalism, but socialism predates the “Communist Manifesto,” an 1848 pamphlet by Marx and Friedrich Engels, by a few decades. They are both economic philosophies that advocate for public ownership, particularly over the means of production and the distribution and exchange of goods in a society. And both philosophies run contrary to free-market capitalism, which, they contend, explo...
Differences
There are differences between socialism and communism, however. In fact, communism can be thought of as a strict and all-encompassing version of socialism. Under communism, all property is communally owned; private property doesn’t exist. Under socialism, individuals can still own private property. Marx predicted that a violent worker uprising against the middle and upper classes would bring about the communist state, whereas socialists tend to seek change and reform without overthrowing the...
Socialist Claims
There are many points of contention between socialists and capitalists. Socialists consider capitalism and the free market to be unfair and possibly unsustainable. Most socialists contend that market capitalism is incapable of providing enough subsistence to the lower classes. They contend that greedy owners suppress wages and seek to retain profits for themselves.
Capitalist Claims
Proponents of market capitalism counter that it is impossible for socialist economies to allocate scarce resources efficiently without real market prices. They claim that the resultant shortages, surpluses, and political corruption will lead to more poverty, not less. Overall, they say, socialism is impractical and inefficient, suffering in particular from two major challenges. The first challenge for socialism, widely called the “incentive problem,” is that no one wants to be a sanitation wo...
While socialism and capitalism seem diametrically opposed, most capitalist economies today have some socialist aspects. Elements of a market economy and a socialist economy can be combined into a mixed economy. In fact, most modern countries operate with a mixed economic system; government and private individuals both influence production and distr...
Mixed economies are still relatively young, and theories around them have only recently been codified. “The Wealth of Nations,” Adam Smith’s pioneering economic treatise, argued that markets were spontaneous and that the state could not direct them or the economy. Later economists, including Jean-Baptiste Say, F.A. Hayek, Milton Friedman, and Josep...
China
Today, very few countries are close to pure socialism. Perhaps China is the most prominent example, with a communist government that effectively nationalizesmany of the nation’s key industries. State-owned enterprises are a key feature of the Chinese economy, although several steps toward capitalism and liberalization have created certain economic zones (e.g., in Shanghai) where private corporations can co-exist and profit.
Cuba
Cuba remained closer to a Marxist-Leninist socialist economy, following its communist revolution in 1959 and the installation of Fidel Castro as its leader. After Castro’s death, however, Cuba, too, saw some liberalization. In 2019, Cubans voted for a new constitution that granted private property rights and greater access to free markets, while preserving the socialist political system.
North Korea
The last remaining Marxist-Leninist socialist economy that has not seen any reforms is that of North Korea. The country remains ruled by a communist dictatorship and a closed command economygoverned by strict central planning. Laos, another country in Asia, is also a socialist state, but is more open than North Korea.
A nation needs to transfer the means of production to transition from socialism to free markets. The process of transferring functions and assets from central authorities to private individuals is known as privatization. Privatization occurs whenever ownership rights transfer from a coercive public authority to a private actor, whether it is a comp...
- Will Kenton
- 2 min
Feb 5, 2021 · Today, the historical words capitalism, socialism, and communism do not fully capture the economic systems of nations. New words are also used to describe economic systems: free market system; mixed economy; command economy.
Oct 22, 2024 · In a socialist economic model, the production of goods and services is either partially or fully regulated by the government. This is referred to as central planning, and the economic structure...
Jul 15, 2019 · Socialism would allegedly depress that freedom by prohibiting or limiting capitalist activities such as setting up a private firm, hiring wage workers, and keeping, investing, or spending profits. Socialists generally acknowledge that a socialist economy would severely constrain some such freedoms.
Feb 4, 2020 · Socialism is an economic system very different from capitalism, feudalism, and slavery. Each of the latter divided society into a dominant minority class (masters, lords, and employers) and a...
People also ask
Is socialism an economic system or an ideology?
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Socialism is both an economic system and an ideology (in the non-pejorative sense of that term). A socialist economy features social rather than private ownership of the means of production.
